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Module 1: Economic activity

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Net Exports (X-M)

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Economics - Net Exports (X-M)

Net Exports (X-M)

Spending on exports is included in aggregate demand as it contributes to
economic activity in Australia, whereas imports are deducted from the other
components of aggregate demand because they have an imported component
within them, which provides economic activity overseas, not in Australia.
Both exports and imports account for about 20 per cent of aggregate demand.
A depreciation [1] of the currency, by making exports relatively cheaper
and imports more expensive, should promote domestic economic activity.

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[1] http://alison.com/#